Unformatted Attachment Preview
Running head: STRATEGIC MANAGEMENT
1. Today’s environmental scanning is not limited to domestic industry landscape-rather it has been already a global competition. Please provide your definition of
global economic world. Discuss the strategic reasons for globalization of a business
and value chain activities. And do you agree with the argument, “The World isn’t
Global economic world refers to the economy of each person in the world. It covers all
forms of international businesses that occur between countries, companies up to individual level.
This system of economy resulted from globalization, whereby people realized the need to
participate in certain activities in order to earn an income. Basically, global economy world is a
single system which allows all the countries to collectively participate in economic development.
This is because it involves international exchange of goods and services for monetary gains.
The strategic reasons for globalization and value chain activities include making higher
profits for the organization therefore achieving economic advantage. Through globalization, it is
easier for various companies to collaborate and work on certain projects which ends up providing
ore profits. Through globalization, it is possible to figure out items and services which are
highly needed, and this is also provides a better opportunity for most businesses to thrive. When
it comes to value chain activities, the strategic reason behind it is to ensure the right procedures
are used to ensure the value of the activities involved supersedes the expenditures.
I do agree with the argument that “the world isn’t flat”. This is because even after
globalization we still have countries which are leading in economy and the ones which are very
much behind. As much as there is improved interaction through the use of technology and the
freedom of collaborating with other countries when it comes to business, we still have areas in
the world where certain countries are disadvantaged. This may be due to reasons such as natural
calamities, security issues etc. that prevent them from thriving when it comes to business.
2. There are three types of global competitive strategy: Global, Multi-domestic, and
Transnational strategy. Discuss advantages and disadvantages associated with multidomestic strategy. Provide your suggestions on the managerial considerations (e.g.,
organizational structure, control systems, coordinating mechanisms, etc.) for
successful implementation of the multi-domestic strategy.
The advantage of multi-domestic strategy is that it focuses much on meeting the needs of the
consumers, which makes them feel more important. This is because in this strategy, the
provision of services tends to differ according to the nationalism and the culture of people.
Therefore, the company must first analyze products or services which would work best for
different group of people before making the actual deliveries. At the same time, it creates more
satisfaction since people get what they need.
The disadvantage of this strategy is that it becomes very hard for the companies or the
supplies to study various cultures before making deliveries. These processes end up being time
consuming because the firm must take time and understand how people survive in their
respective areas and come up with things that would work best for them. The process is also
costly as opposed global strategy where the company comes up with one product which is
distributed in all parts of the world.
For successful implementation of multi domestic strategy, it is important for the
management to consider the financial security of the organization. This is because the process of
analyzing the culture of people and providing goods and services is quite expensive. Therefore,
the organization should be in a position to be financially stable in order to facilitate the
implementation of this strategy. Another important aspect to consider is organizational structure,
which defines the allocation of various duties and the leadership in relation to the specified
objectives. With this, it would be possible for the organization to determine how various tasks
are going to be distributed in order to ensure that the needs of the consumers are all met.
3. Discuss how the need for control over foreign operations varies with the strategy
(e.g., global standardization vs. localization) and distinctive competencies of a
company. What are the implications of this relationship for the choice of entry mode?
In the global market, cost reduction and differentiation are some of the major pressures
most companies face in the global market. For instance, global standardization focuses on
achieving cost reduction by sticking to the same products and services in all countries. In this
case, there is the assumption that the provided products are in demand, and therefore there is
very little spent in the marketing process. On the other hand, localization strategy aims at
achieving differentiation. This is by being specific on the kind of products and services that are
made available in various countries. This highly relies on factors such as the demand, culture,
demographics among many other things. It is one of the approaches that ensures the company
remains relevant in the global market for the longest time possible.
We also have major choices of control over the global or rather foreign operations.
Among them we have exportation, whereby the host countries produce goods which are later on
transported to other countries. We also have a choice of franchising, where the foreign countries
agree to long term commitment in business with the host country. Joint adventure is also another
option where global company partners with the host company and uses its knowledge in making
more profits. There is also the option of wholly owned subsidiaries, whereby the host country
owns 100% of the stock making it hard for the global to take control over the production process.
Having looked at all these cases, it is clear that most countries/ companies prefer incurring more
expenses in various process with the aim of gaining control over the global market. The choices
taken by the companies are highly determined by their distinctive competities.
4- Why was it profitable for GM and Ford to integrate backward into component-parts
manufacturing in the past, and why are both companies now buying more of their parts
from outside suppliers? What value creation activities should a company outsource to
independent suppliers? What are the risks involved in outsourcing these activities?
It was profitable for GM and Ford to integrate backward into components parts
manufacturing in the past since it enabled them to have better control of the processes involved
and the costs. At the moment, the companies are buying a lot of parts from the outside supplies
in order to achieve future benefits. It is necessary for these companies to have a lot of
investments in order to make enough components within the company. Allocation of all these
components would be needed later on in facilitating the companies’ operations. For instance, if
we look at Ford Company, this company highly invests in purchasing the spares. The same
spares are useful when it comes to making vehicles, operating the distributors among many other
things. In other words, this strategy helps in ensuring the company makes enough investment in
order to make much profits later on.
Value creation activities which a company should outsources from the independent
suppliers include activities which are less costly and at the same time lead to production of
products with higher quality. The activities should also fall under the major competencies of the
company and at the same time they should flexible in such a way that they can adapt to the
changes in technology. The risks associated with these outsourcing activities include loss of
control at the global level. This is because outsourcing reduces the level of originality of the
company and hence reducing its competencies. Another risk is that increased cost as compared
to the initial expectation, making it hard for the involved company to keep up with the costs.
5- What steps would you recommend that a company take to build mutually
beneficial, long-term, cooperative relationships with its suppliers?
Building good, long term, and cooperative relationships with suppliers are something
very beneficial to a firm. Just like any other relationship, communication is an important tool in
ensuring that you build a mutually beneficial, long term cooperative relationship with suppliers.
Regular communication with the suppliers can improve and strengthen the relationship between
a firm and its suppliers. In addition to that, for a firm to build good relationships with its
suppliers, it is important to communicate any aspects that may affect the suppliers in advance so
that transactions with the supplier run smoothly. Communication prevents any bottlenecks or
delays as a result of conflicts or misunderstanding between the company and the suppliers.
Effective communication will streamline the supply chain process hence promoting efficiency
which, in the long run, results to the reduction in the cost of production.
Another important factor to consider in an attempt to build beneficial relationships with
suppliers is the financial aspect. Since a relationship between a firm and its suppliers is a
business relationship, it is essential to an honest business partner. Paying suppliers on time can
go a long way in building a healthy and long term business relationships. Most of the
relationships between suppliers and firms experience challenges as a result of late payments. No
supplier wants to be in a business relationship with a firm that pays late if they have other
options, and if they stay, the relationship will be strained. A relationship between a firm and its
suppliers could be better if a firm ensures that they make their orders in good time, so it has to
avoid putting unnecessary pressure on the suppliers to meet difficult time schedules.
6- When is a company likely to choose (a) related diversification and (b) unrelated
Related diversification comes in when a firm decides to venture into other product lines
that are related to the product line that that firm has been dealing with previously. Companies or
firms venture into related diversification for various reasons and in various circumstances. One
of the situations where a firm may want to venture into related diversification is when the firm is
interested in harmonizing the activities of the firm. This is so because when a firm is dealing
with the related product, it is easier to harmonize various production activities, unlike when it is
dealing with unrelated products. In addition to that, a company may decide to undertake related
diversification for competitive reasons.
Unrelated diversification, on the other hand, is when a firm decides to venture into
product lines that are completely unrelated to what the firm is currently dealing with. One of the
circumstances in which a firm would want to undertake unrelated diversification is when the firm
seeks to manage the risk of economic downturns in the product its currently dealing with. With
diverse products, a company can sustain itself with business in one product while the other
product is facing a cyclical depression. Therefore firms undertake unrelated diversification with
the aim of risk management. Diversification of products is a method of spreading risks.
Whenever one product line encounters loses the firm will be able to maximize profits from the
other product line hence reducing the magnitude of the loss. In a case, where the firm ventures
into one product line, it is likely to collapse or run bankrupt in case the product sales drop as they
will result to reduced revenues.
7- How can related diversification create a competitive advantage for the firm?
What challenges might firms confront in achieving competitive advantages through a
related diversification strategy?
A firm can derive competitive advantage from related diversification. The first way a
firm can derive competitive advantage from related diversification is through cost minimization.
When a company diversifies to products that are related to the products it already deals with,
there are a lot of opportunities for cost minimization. Minimization of cost means that a firm is
able to spend less than its competitors. As a result of reduced cost of production, a company will
be in a position to reduce its prices than its competitors. Since demand increases with reduction
in prices, the firm will experience increased sales that will in the long run translate to huge
profits compared to those of its rivals hence creating a competitive advantage. Another
competitive advantage that firms can derive from related diversification is the fact that it is a
safer form of diversification. Therefore if a company undertakes related diversification, it
experiences fewer risks as compared to competitors undertaking unrelated diversification.
Firms deriving competitive advantage from related diversification may be faced with a
few challenges. One of these challenges is getting overstretched. In related diversification, firms
deal with related a product, which means they may share some resources in an attempt to
minimize cost. This, however, may lead to a challenge of overstretching of resources, and that
could have detrimental effects on the firm. Overstretching may drain the firm’s resources such as
the Finances resulting to difficulties in production or huge debts that may render the firm
bankrupt. In addition to that, diversifying to related products may broaden the objectives and
targets of a firm to such a level that the firm loses focus. Once a company loses focus, it is likely
to fail in meeting its goals or rather strategic objectives.
8- What factors make it most likely that (a) acquisitions or (b) internal new
venturing will be the preferred method to enter a new industry?
There are various factors which determine the entry method which a company may use in
order to perform well in a certain industry or market. This means that there is no constant
method that can be applied for any company and it ends up being successful. For instance, there
are those companies which would prefer the acquisition method. In this case, one major factor
that influences this market entry method is the financial stability. In this case, the company has
to purchase more than fifty percent of another company’s shares in order to gain full control.
This is a more convenient strategy that would work best for a company which does not have the
adequate facilities to keep up with the competence of the industry. The method generally places
the company in a better position to compete well with other companies.
We also have companies which would go for internal new venturing. In this case, the
company makes use of its internal resources to come up with new ideas. This works best for
companies which work a lot on issues related to development and research. This is one of the
areas that requires high level of originality, therefore there is a need to come up with new and
unique ideas. The strategy also works best for company which deal with technology and
innovation. In this case, there are also a number of things which need to be work on from the
scratch. Lastly, it is also appropriate when the industry which the company is in is much
competitive. Unique ideas make the company outstanding and at the same time it provides a
9- Imagine that Amazon has decided to diversify into the food delivery services.
What method would you recommend that Amazon pursue to enter this industry?
If amazon was to diversify into food delivery services, the entry method that I would
recommend is internal new venturing. This is because I believe it has the capacity to purchase
all the requirements that are necessary in facilitating its processes. Amazon is one of the
successful companies globally, therefore I believe the finance issue would not be a problem.
This method is very convenient when the company is financially stable. If we look at the
acquisition method, it tends to work best for companies which require much support in order for
them to thrive well within a given market. In the case of amazon, the case is a little bit different,
since it has been on market and functional for the longest time. This means that the company
may still find it easy to diversify into another industry which involves food delivery.
To add on that it is important to note that food delivery industry is also one of the
competitive sectors at the moment. In the modern society, a lot of people have moved to the use
of technology and therefore find it ore convenient to use services that are available in their digital
gargets, among them being food delivery. This means for Amazon to be successful it needs to
come up with different and better strategies that would make the same process easier and more
effective. Many companies are already doing the same thing, therefore coming up with different
operation would actually give the company a competitive advantage. This is what internal new
venturing is all about: being in a position to come up with better services that would outshine
other companies in the competitive industry.
10- What kind of companies stand to gain the most from entering into strategic
alliances? Discuss ways to increase the success rate with the strategic alliances.
The kind of companies which stand to gain much from entering into strategic alliances
are the banking companies. In this strategy, the involved companies work together to achieve
the specifies goals but at the same time they remain independent. Banking companies tend to
gain much since through it, there is a lot shared in relation to ways of providing better services to
the clients, how to expand the branches and also the best technology to use in order to operate
well. In other words, the strategy is more of sharing ideas that would help the involved firms to
thrive well in the industry. In this case, the involved companies do not focus more on competing
each other, but rather working together in ensuring that they provide the best services to all the
clients. Most banking services tend to provide the same services, which eradicates the need to
compete or rather outshine each other.
In order to increase the success rate with strategic alliances, there are various things that
the involved companies should consider. One of then is having clear rules and guidelines on
how to achieve the set goals. This would help the companies to remain on track. Another thing
is discussing or sharing the complementary skills openly so that they can be used in facilitating
various processes. It is also important to classify the roles of each person or company. This
makes it easier for the involved parties to carry out their roles effectively without being pushed.
Having a common mission statement also helps the involved firms to work towards the same
direction. This makes it easier for the firms to collaborate and achieve the expected outcomes.
11. How might a company configure its corporate governance systems and its strategymaking processes to reduce the probability that managers will pursue their own selfinterest (agency behavior) at the expense of stockholders?
There are various things organizations should do to reduce the probability of managers
pursuing their own interest at the expense of the stakeholders. One of the s ...